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- Get $3 hair cut from Great Clips. Get it today
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About Great Clips
The modern American economy is intensely competitive. It means many things, but a few things are more important than the others. First, due to competition, it means that differentiation is often very slight. For example, a difference in the price of 5% can have a significant impact on sales.
Secondly, a company in America can attain success easily by enhancing its ‘economy of scale’. For those of you who do not understand the term, it simply means that a business can succeed by saving up cost with the help of an increase in the magnitude production or service.
But to increase production, one needs to create demand. After all, what would a company do with a large number of goods and services at hand if there is no one to buy them? Great Clips, a hair care, and salon chain understood this market mechanism way too well and today it has over 40,000 stylists, in 4, 000 locations. The reported revenue of Great Clips is $1.03 billion in 2013.
Though Great Clips is known for its haircuts, it does provide services beyond mere haircuts. These include shampooing, conditioning, styling, perms, and work on bangs, neck, and beard trims. It can be accurately said that they specialize in the management and beautification of any and all hair above the neck.
Beyond haircuts, Great Clips sells a wide variety of hair care products from each of its locations. It is yet another method Great Clips employs to produce revenue and create customer satisfaction. For example, a customer might come in for a haircut and enjoy the smell of a shampoo that the stylist is using them also sells. The customer buys the shampoo, producing revenue for Great Clips and satisfaction for the customer.
GreatClips.com offers three lines of professional-quality hair care and styling products. These are for all genders and ages, which include Solutions by Great Clips, Tea Tree Solutions by Great Clips, and GRIT @ Great Clips. Besides, Great Clips locations also carry Matrix, American Crew, Nioxin, Sexy Hair, Joico, Tigi, Paul Mitchell, and Redken product lines.
Though hair care products in-stock may vary by location, the breadth of Great Clips hair care product offering is impressive. It has also proved to be a benefit to Great Clips to offer its own branded products as well as those of other companies. It cultivates the appearance of choice for the customer and gives them an active role in their hair care.
Origin of GreatClips & History of its Expansion
Before we go into detail regarding Great Clips’ operations, a brief overview of the company’s history is in order. Their original location opened as “Super Clips” near the campus of the University of Minnesota on September 22, 1982. It is not uncommon for a company to open up under a different name and then change later, as they did.
For the length of its operation, Great Clips decided to pursue a strategy of low-priced haircuts. In this context, the 1980s was a time of enormous economic expansion in the United States, so it’s not a surprise that they met with immediate success. Along with the economic expansion, the 1980s saw a massive boom in franchised and chain businesses. The perfect examples of these are McDonald’s, Burger King, CVS, Rite Aid, etc. It also manifested for Great Clips, which took advantage of its early success and opened an additional three locations for three months.
In early 1983, Great Clips continued to expand, and the founders brought an additional partner to augment and help lead their expansion and franchising. The first franchised Great Clips location opened in the summer of 1983 in Brooklyn Center, MN. The company expanded rapidly, first to 150 franchised locations in 1988 and then to 1,000 locations by 1997.
Great Clips remained immune to contraction and economic variability and continued growing. The 2,500th location was opened in 2006, and their 3,000th location was opened in 2011.
In 1984, the Great Clips’ owners recruited Rhoda Olsen, one of the founders’ sisters, to work for Great Clips as a training consultant. It was intended to create a standardized training course for the rapidly expanding company. This training course was intended for everyone working for them, from franchise operators to stylists to cashiers. In March 1987, Olsen ascended to the position of vice president of human resources at Great Clips.
In 1987, Ray Barton, one of the founders, became president of the company. A decade later, in 1997, amid massive expansion, Barton bought out his partners to become the majority shareholder.
Though it’s common for large companies to experience massive executive and workforce turnover, Barton spent a great deal of time as CEO of Great Clips. He stepped down in 2011, and his sister Rhoda Olsen succeeded him.
Marketing Strategy of Great Clips
Now that we’ve briefly reviewed the history of the company, we can continue on to its strategies and operations. As previously mentioned, one common way (perhaps the most common way) is on price. It seems to be GreatClips primary means of creating value. Though the price per haircut may value slightly from location to location, it averages $15 for an adult and $13 for children and seniors. As we will discuss later, Great Clips has a discount coupon program that can reduce the price of a haircut to as low as $7.99.
As anyone who has gotten a professional haircut recently will recognize, these prices are quite low, perhaps absurdly low. The Professional Beauty Association notes that the average haircut price in the United States is about $43 for women and $28 for men, which is much higher than the price at GreatClips. It distinguishes them from the rest of the market and creates value. Even Supercuts, which is Great Clips’ primary competitor on the basis of price, averages $16.49 as the price of its basic level of haircut.
Furthermore, it is quite common to find coupons for a Great Clips haircut on Groupon or coupons.com that will discount the price of a haircut from between 5% to 25%. It can, therefore, be stated with a high level of confidence that Great Clips significantly distance itself from its competitors and the rest of the market based on its price.
Brand Value of Great Clips
It brings us to the matter of branding and value. As all business students learn, the single most important thing to a business or corporation is its brand. For example, BMW and Mercedes Benz are heavily branded as luxury automobiles. On the other end of the spectrum, Nissan is commonly recognized as an inexpensive brand of car. Sometimes branding is intentional on the part of the company; other times, it is inadvertent and arises from unplanned events in media and public relations. Whether deliberate or not, Great Clips is firmly established in as a haircut that is inexpensive, affordable, or, as some might say, “cheap.”
We’ve established that Great Clips has differentiated itself on the basis of price to consumers. It would appear that they has also cultivated the advantage of economies of scale for itself as a method of maximizing profit margin.
Economies of scale work by averaging out production or operations over as large a number of sales as possible, this tends to lower the cost of goods sold, which leads to higher profit margin. For example, a large hotel chain can purchase bathroom towels, soap, and room keys in bulk. It lowers the price they pay and increases their eventual profit. In the case of Great Clips, this would manifest in supplies such as hair combs, scissors, hairdryers, hair gel, hair dye, etc.
In other words, because of its large scale of operation at 4,000 locations, Great Clips is able to purchase supplies like combs and scissors in bulk. Which means they pay a lower price than if they were buying supplies for only 1,000 stores.
Beyond that, the Great Clips field workforce of 40,000 is spread out over a corporate staff that would probably be about the same size as for a business of only 10,000, which leads to further economies of scale.
To continue the comparison with its primary competitor, Supercuts operates about 2,400 locations compared to 4,000 for Great Clips. Which indicates, Great Clips has probably built a stronger economy of scale than Supercuts, which makes it relatively easier to maintain a higher profit margin.
Though it is known for its low prices and correspondingly high value, GreatClips has made attempts to innovate its operations to enhance its services. The first attempt at innovation is one that many customer services companies, from auto service to take-out restaurant have implemented. In 2011, Great Clips integrated Online Check-In, into its operations. It proved to be the industry’s first real-time check-in application.
This method allowed customers to check waiting times and add their name to the waitlist before they even set foot into a location. This simple innovation is a logical step forward and has the potential to provide a seamless, positive customer experience. It should be no surprise, therefore, that in the eight years since its creation, the app has been downloaded more than 3 million times.
Currently, the app is used by about 20 percent of GreatClips customers. Though it might seem simple and the opposite of flashy, this kind of simple, well-executed strategy is a perfect example of what has made Great Clips so successful.
Great Clips followed its online check-in innovation with Clip Notes in 2014. Clip Notes allows Great Clips stylists and employees to track customer data across locations. This data includes the frequency of visit, preferred haircut style, and more information. Most importantly, this information can be accessed at all of Great Clips’ more than 4,000 locations.
As with online check-in, this innovation allows for seamless, positive customer experience. It also cultivates the appearance of a longstanding relationship between company and customer, which is an asset that is pure gold for all businesses.
Other Discounts and Deals
As a typical example of Great Clips’ strategy of differentiation on the basis of price, all hair gels bought in stores are 25% off during the month of July. The special price excludes liter sizes and mini’s. Only at participating salons, while supplies last.” It is a perfect example of the Great Clips price differentiation strategy at work. It’s an irresistible offer to low-income customers that gives them a motivation to come into the store.
The customer probably figures that while they’re there, they might as well get a haircut. They’ll possibly download the online check-in app, which creates a tie between customer and company and increases the probability of future visits. All of this increases the odds that Great Clips will make money.
Great Clips is based on a well-conceived strategy of price differentiation and economies of scale. This strategy is well executed by a workforce that is led by ownership, which can honestly claim to have been kept “in the family.” As we’ve discussed, all of this has led to a profitable, successful business.
It has expanded rapidly in the four decades since its founding in 1982. Though Great Clips does not appear in need of any drastic change in strategy, it seems to a bit lacking in social media presence. For example, its Twitter and Instagram profiles only have about 17,000 followers each. It is almost pitifully low for a company with 4,000 locations. That’s barely four followers per location! I would advise Great Clips to invest more in its social media strategy. It is an easy, inexpensive method of connecting with consumers and cultivating on-going relationships with customers.
For instance, Great Clips could institute a marketing campaign whereby customers get 10% off the price of a haircut. This discount would be conditional and valid only if the customer posts a selfie of themselves in the salon chair and tag their Instagram account. This would require little to no effort for them and inevitably lead to invaluable social media exposure.
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